Buy your next home before you sell this one.
An offer that depends on selling your current home is easy for a seller to pass over. Here’s how to buy first.
The short version
Why contingent offers lose
A home-sale contingency hands the seller your timeline. When a seller has other offers, the one without that risk often wins.
Leave the old payment out
If your current home is listed for sale and you have at least 20% equity and 12 months of reserves, our buy-before-you-sell option lets us qualify you without your current payment. Program rules apply.
Cover the down payment
Your down payment is tied up in your current home until it sells. A bridge loan, or a home equity line opened before you list, can cover it.
The full guide
Buying Before You Sell in Chicago: Bridge Loans, HELOCs and Sale Contingencies
Moving up runs into two problems. The down payment for the next home is tied up in the one you live in, and until that home sells, a lender normally counts both housing payments. Here’s how buyers in Chicago and the suburbs get around both.
Problem one: the cash
For most move-up buyers, the down payment is the equity in their current home. You can’t spend it until that home sells, and your next home may come on the market first.
Problem two: qualifying with two payments
Until your current home closes, a lender normally counts its mortgage, taxes and insurance along with the new payment. Two housing payments can push your debt-to-income ratio past what the loan allows, even when you can afford the new home on its own.
Under Fannie Mae’s rules, the current payment can be left out only once there is a signed sales contract and the buyer’s financing contingencies are cleared (Fannie Mae Selling Guide B3-6-06). That timing doesn’t help a buyer who wants to write an offer before their home is under contract.
Why a sale contingency weakens your offer
A home-sale contingency makes your purchase depend on selling your current home by a set date. It protects you, but the seller takes on the risk that your sale stalls. When a seller has more than one offer, the offer without that risk often wins.
Option 1: qualify without your current payment
We offer a buy-before-you-sell option for this. If your current home is listed for sale, you have at least 20% equity in it and you have 12 months of reserves, we can leave your current payment out and qualify you on the new home alone. That lets you write an offer that doesn’t depend on your sale. Program rules and approval apply, and we confirm the details for your situation before you write an offer.
Option 2: a bridge loan for the down payment
A bridge loan is a short-term loan against the equity in your current home. It covers the down payment on the next one and is paid off when your current home sells. Bridge loans usually cost more than a regular mortgage, so we compare one with your other options first.
Option 3: a home equity line opened before you list
A home equity line of credit (HELOC) on your current home can fund the down payment. Open it before you list, because many lenders won’t open a line on a home that’s already for sale. Any balance you draw has a payment, and we plan for it when we qualify you.
Option 4: sell first and rent back
If you’d rather sell first, ask your agent about a rent-back. You close on your sale, then rent your old home from the buyer for a short time while you buy. Your equity is in hand for the down payment, and you move once.
How to choose
It comes down to your equity, your cash reserves, how fast homes are selling in your area and how much risk you’re comfortable carrying. Kyle runs the options side by side, with the payment you’d carry while you own both homes, before you start touring. With your OK, your CPA and financial advisor can weigh in too.
FAQ
Can I buy a new home before selling my current one?
Often, yes. If your current home is listed for sale and you have enough equity and reserves, some programs let us leave your current payment out when we qualify you. A bridge loan or a home equity line can cover the down payment.
How much equity do I need to buy before I sell?
For our buy-before-you-sell option, at least 20% equity in your current home, plus 12 months of reserves. Other programs have their own rules, and approval depends on your full file.
What is a bridge loan?
A short-term loan against the equity in your current home, used for the down payment on the next one. It’s paid off when your current home sells.
Is a home-sale contingency a bad idea?
It protects you if your home doesn’t sell, but it weakens your offer. If you can qualify without it, your offer competes better.
Should I open a HELOC before I list my house?
If you plan to use one for the down payment, yes. Many lenders won’t open a home equity line on a home that’s already listed for sale.
Not all borrowers will qualify. Programs, terms and requirements can change and are subject to credit and property approval.
Let’s talk.
Send Kyle your home’s rough value, what you owe and the price range you’re shopping. We’ll tell you whether you can buy first and what you’ll pay in the meantime.
Talk to Kyle